DexCom, Inc. DXCM is well poised for growth on the back of solid international presence and robust product portfolio. However, stiff competition remains a woe.
The stock has gained 178.5%, compared with the industry’s growth of 13.6% in a year’s time. Further, the S&P 500 Index rose 8.7% in the same time frame.
DexCom — with a market capitalization of $40.77 billion — is a medical device company focused on the design, development and commercialization of continuous glucose monitoring systems (CGM). The company has a trailing four-quarter earnings surprise of 218.2%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Weighing on the Stock?
The market for blood glucose monitoring devices is highly competitive, subject to rapid change and significantly affected by new product introductions. Consequently, intense competition continues to remain a concern.
DexCom continues to focus on international markets, particularly Germany. Management announced in first-quarter 2020earnings callthat the company continues to see significant growth in direct markets like Germany and the U.K. with its distributor markets growing substantially with strength across the board.
In first-quarter 2020, international revenues (19% of total revenues) surged 61.1% year over year to $112.8 million. International growth remains strong and highlights significant prospects on the back of improving global access and awareness.
DexCom's FDA-cleared continuous glucose monitoring (CGM) system — the DexCom G4 Platinum — is contributing significantly to the top line. The inbuilt features of the G4 Platinum make it the most innovative system for continuous glucose monitoring in the market.
In January 2020, Tandem Diabetes launched its latest integrated pump offering — the Control-IQ system — integrating the DexCom G6 sensor and its type zero algorithm to automated insulin delivery. Interestingly, this is the first integrated system to provide automated correction boluses based on the customer CGM ratings in its AP algorithm.
In June, the company announced that the Dexcom G6 CGM System has obtained CE Marking across Europe for attaching on the back of the upper arm, thereby offering patients more choice when it comes to comfortably wearing their device.
Dexcom’s Insulet and Lilly diabetes management products are also progressing well. In December 2019, Insulet commenced the important trial, and thereby remains on track for a launch later in 2020.
Per the first-quarter 2020earnings call the FDA was quick to enable the use of DexCom CGM in the hospital setting and other healthcare facilities to lend support to COVID-19 healthcare related efforts, thereby further boosting demand for the product.
Which Way are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $1.78 billion, indicating growth of 20.5% from the previous year. The same for adjusted earnings per share stands at $2.23, suggesting an improvement of 21.2%.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Quest Diagnostics Incorporated DGX, West Pharmaceutical Services, Inc. WST and Laboratory Corporation of America Holdings LH. While Quest Diagnostics and Laboratory Corporation sport a Zacks Rank #1 (Strong Buy), West Pharmaceutical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Quest Diagnostics has an estimated long-term earnings growth rate of 13.2%.
Laboratory Corporation has an estimated long-term earnings growth rate of 7.5%.
West Pharmaceutical has a projected long-term earnings growth rate of 9.2%.
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Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report
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